Arab News, Wednesday, May 15, 2019 | Ramadan 10, 1440
Saudi Aramco bets on oil supply to Europe, trading expansion
Saudi Arabia: Saudi Aramco aims to boost its oil supply to
Europe by 300,000 barrels per day (bpd) within the next two years as it expands
its trading operations there with an office opening this summer in London, a
senior company executive said.
Aramco, the world’s biggest oil producer, is expanding its downstream, or
refining and marketing, footprint globally by signing new deals and boosting the
capacity of its plants to secure new markets for its crude.
The company’s trading arm has been focusing on a new processing arrangement in
which it would supply European markets with both crude oil and products.
Aramco is looking to finalize deals in the next two years through swapping
mainly Saudi crude with oil products to supply customers in Europe and the
Mediterranean, Abdulaziz Al-Judaimi, Aramco’s senior vice president for
downstream, told Reuters.
“I am going to bet on Europe... We believe that Europe is a market that we are
going to stay in for a long time,” Judaimi said in a telephone interview this
“The whole idea is we supply crude, and we offtake refined products to supply
markets like Italy, the Balkans, as well as Cyprus ... In Europe, having a
virtual dedicated outlet and processing agreement is really the right winning
Aramco currently has more than 3 million barrels a month of oil supply and
product swap arrangements in Europe, he said. The company has deals with
Poland’s PKN Orlen, Greece’s Motor Oil Hellas and Egypt’s Midore.
“We are looking to expand the 3 million barrels to almost 10 million barrels in
a month, within the next two years. This means we have almost created a 300,000
bpd refining capacity in Europe,” Judaimi said.
The company has invested in its storage capacity in Egypt and the Dutch port of
Rotterdam. About 60% of the capacity of the SUMED storage pipeline in Egypt is
for Saudi crude, used by Aramco to reach its customers in Europe, he said.
The Rotterdam terminal now holds more than 6 million barrels of oil, he said.
Aramco will also continue to invest in Greece, Judaimi said.
The priority is to supply refiners with Saudi crude to lock in their capacity,
but non-Saudi crude can also be supplied through spot trading.
“This is a win-win strategy because it helps the refiner ... and for us it is to
place crude oil in the European refining assets,” he said.
“The refining sector in Europe requires such deals and we are taking advantage
of available capacity.”
The state oil giant’s trading arm, Aramco Trading Co. (ATC), plans to open an
office in London in July, Judaimi said. ATC has been expanding its overseas
operations and increasingly competing with global trading houses in new markets.
ATC logged record trading volumes in crude and refined products of 4.5 million
bpd in the first quarter, and is on track to reach its target of 6 million bpd
by the end of next year, Judaimi said, close to Vitol’s trading level.
“We started seven years back on trading activities and our growth story is quite
a successful story, we started with 300,000 bpd and we are now at about 4.5
ATC was set up in 2012 initially to market refined products, base oils and bulk
petrochemicals, but has since expanded into crude trading.
The trading sector faces increased rivalry between national oil companies
(NOCs), international oil firms and Swiss merchants.
NOCs have cheap feedstock and strength in refining, allowing them to compete
aggressively with oil majors and especially traders that lack their own
Aramco, the world’s top oil producer and exporter, aims to become the largest
integrated energy firm, with plans to expand refining operations and
petrochemical output. It pumps around 10 million bpd of crude, of which it
exports about 7 million bpd.
The company plans to raise its refining capacity — inside Saudi Arabia and
abroad — to 8-10 million bpd, from around 5 million bpd now. Aramco is expanding
its refining business at home as well as in new markets, particularly in Asia.
Judaimi said Aramco’s new, 400,000-bpd refinery in the southwestern Saudi
province of Jizan was expected to start later this year.
Aramco will make an investment decision to go with the front-end engineering for
its refining joint venture with Chinese defense conglomerate Norinco by the
third quarter of this year, he said.
“China focus is important; China now imports a lot of crude oil, and we believe
that could be a market that is growing and strong as well.”
He said Aramco was looking at multiple downstream opportunities in India.